First Time Rate Increase


Bloomberg.com: Fed Futures Suggest an August Rate Increase for the First Time

Man, this never seems to stop. Just yesterday I was talking to Val about how tough money can be and how the cost of living for everyone in my generation in the good ‘ole US of A is so damn hard. Her sister called at lunch and told her they were cutting the work hours for that position. So at $25 an hour, now she can only afford her car payment and 1CC bill a month. And that’s living at home. We’re not going to talk about trying to “live” on one income like your’s truly. And thats the thing, at least I was talking to Tim about it too. With two or more people in a household you can justify all these costs.. food for more then just you, and rent for 2 people to live, etc.. it makes sense. Throw 2 paychecks in the mix and it’s like magic! I feel like at the end of the month some of these nice things I spend my paycheck on like cable and DSL and even the simple ones like magazines and an occasional LA Times for my girl.. just aren’t worth it. Not if I ever want to have a savings again like I used to before college.

Check out this article I found below. I heard it being talked about on Good Day LA this morning and had to read up on it.

June 14 (Bloomberg) — Interest-rate futures are suggesting for the first time that the Federal Reserve will raise interest rates in August after U.S. consumer prices excluding food and energy rose more than forecast for a third consecutive month.

The yield on the federal funds futures contract for August delivery climbed about 6 basis points to 5.355 percent at the Chicago Board of Trade, putting the odds at about 52 percent for an increase of the central banks’ key rate to 5.5 percent. Traders had put the odds at 21 percent yesterday.

Today’s government inflation report convinced traders that the Fed will increase borrowing costs by a quarter percentage point to 5.25 percent when policy makers meet June 28 and 29. Expectations for a June rate rise have climbed since Fed Chairman Ben S. Bernanke’s June 5 comments that signs of inflation are “unwelcome.”

“They definitely have shown their hand that they’re worried about inflation,” said Peter Yastrow, an interest-rate broker for Man Financial at the Chicago Mercantile Exchange, of the central bank’s policy makers. “Everyone is so focused on the inflation ball.”

Futures are agreements to buy or sell assets at a set date and price. Contracts on interest rates are settled in cash. Fed funds futures settle at the fed funds effective rate, which is the average of all overnight rates for the month.

…

An increase in the Fed’s target to 5.5 percent by August would raise the average overnight rate in that month to 5.44 percent. The rate on the fed funds futures contract is derived by subtracting the contract’s price from 100. A basis point is 0.01 percentage point.

Go figure, I suppose I’ll just have to become a famous photographer on the side and work nights and weekends telling people to saycheese. heh


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